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Frontrunning: February 4

  • Arab World Unites to Condemn ‘Barbaric’ Death of Jordanian Pilot (BBG)
  • Jordan hangs two Iraqi militants in response to pilot's death (Reuters)
  • As Oil Prices Climb, Some Harbor Doubts (WSJ)
  • Taiwan plane cartwheels into river after take-off, killing at least 19 (Reuters)
  • Seven dead as commuter train hits car near New York City (Reuters)
  • Apollo’s 600% Profit on Oil Company Leaves Rivals Behind (BBG)
  • Greece's rock-star finance minister Yanis Varoufakis defies ECB's drachma threats  (Telegraph)
  • Greek Signals of Compromise Send Markets Soaring (WSJ)
  • Greece has started debt-swap talks with IMF, minister tells paper (Reuters)
  • Manhattan Bargain: Condos for Less Than $3 Million (BBG)
  • World Bank Probes $1 Billion China Loan (WSJ)
  • Chinese Retailers Play Poker in Empty Malls as Shoppers Go Online (BBG)
  • Staples to Buy Office Depot in Deal Valued at $6.3 Billion (BBG)

 

Overnight Media Digest

WSJ

* As Greece's new ministers hopscotch across Europe, hopes grow of a negotiated agreement between Athens and its creditors. (http://on.wsj.com/1z92REy)

* At least seven people were killed and others were injured Tuesday evening when a Metro-North Railroad train full of passengers crashed into a car in Valhalla, in Westchester County, authorities said. (http://on.wsj.com/1EEZxJy)

* Crude prices rose to the highest level this year amid signs a global supply glut could ease, but some investors and analysts said the worst of the oil rout may not be over. (http://on.wsj.com/1zzGP1r)

* The World Bank has launched an investigation into whether its chief financial officer and other top brass mishandled a $1 billion Chinese loan to the bank's poverty fund. (http://on.wsj.com/1z93ZYO)

* The United States has largely ended its financial-system rescue program and exited from the lion's share of its investments, yet the watchdog created to oversee the Troubled Asset Relief Program continues to grow. (http://on.wsj.com/1yET9La)

* BP joined a raft of oil companies, big and small, slashing their budgets for finding and tapping new sources of crude, offering a pessimistic outlook on a day it reported a net loss for the latest financial quarter. (http://on.wsj.com/1F4bEgu)

* Federal health regulators have approved Pfizer Inc's Ibrance to treat advanced breast cancer. The U.S. Food and Drug Administration on Tuesday granted Ibrance accelerated approval, a type of temporary approval for diseases that don't have viable treatment options based on less clinical data than required for traditional drug approvals. (http://on.wsj.com/1u5CxQ1)

 

FT

U.S. regulator Commodity Futures Trading Commission is considering naming BP PLC and its entities in an enforcement action alleging they broke anti-fraud and reporting rules while using oil pipelines in Canada, the company said in its quarterly results.

Walt Disney's Chief Executive Bob Iger said the company is considering new streaming services for some of its popular content. The service would target some 12 million people who subscribe to broadband Internet service but not to cable television.

U.S. regulatory authorities are stepping up their focus on Moody's probing allegations that the agency inflated ratings on mortgage derivatives to win business in the run-up to the financial crisis, after rival S&P agreed to settle similar allegations by paying $1.375 billion.

Twitter has formed partnerships with magazine app Flipboard and Yahoo Japan to display promoted tweets on their sites, as it tries to convince investors that it can generate revenue even outside its own user base.

 

NYT

* Alexis Tsipras, the newly elected prime minister of Greece, and his finance minister are making fashion statements as they visit European capitals to lobby for relief from the country's bailout debt. (http://nyti.ms/16fKff6)

* Across the Middle East and much of the developing world, government subsidies make energy cheap and encourage consumption. But governments around the world are beginning to take advantage of plummeting oil and natural gas prices by slashing the subsidies. (http://nyti.ms/1DE5MJP)

* Saudi Arabia has been trying to pressure President Vladimir V. Putin of Russia to abandon his support for President Bashar al-Assad of Syria, using its dominance of the global oil markets at a time when the Russian government is reeling from the effects of plummeting oil prices. (http://nyti.ms/1DcdgWr)

* A payout of $1.37 billion will settle an array of government lawsuits that accused Standard & Poor's of inflating the ratings of subprime mortgage investments, but does not represent closure for the broader ratings business. (http://nyti.ms/1zzH1xH)

* The prolonged takeover battle for the GFI Group Inc , a New York brokerage firm and clearinghouse, has been littered with missteps by Michael Gooch, its founder and executive chairman, raising the question of why supposedly intelligent leaders time and again do dumb things when they sell their companies. (http://nyti.ms/1zQZh95)

* The decision by Green Dot Corp to stop selling MoneyPak, its popular prepaid card, will take a bite out of the company's projected revenue and bottom line this year, and that has taken a toll on the company's share price over the last several days. (http://nyti.ms/16waQFL)

* Macy Inc is planning a bit of a makeover, announcing on Tuesday that it had agreed to buy the beauty and spa chain Bluemercury for $210 million, a move that could help broaden the department store's customer base. (http://nyti.ms/1CujamH)

* J. M. Smucker Co announced on Tuesday that it would buy Big Heart Pet Brands, the pet food company once known as Del Monte, from its private equity owners for about $5.8 billion, including debt, in a bid to expand into a fast-growing $21 billion business. (http://nyti.ms/1EF2F8h)

 

Canada

THE GLOBE AND MAIL

** Major landlords of Target Canada have been battling with the U.S. discounter over how it will conduct its liquidation sales, which could steal business from their other mall tenants. (http://bit.ly/1xeDkcy)

** Gasoline prices have been creeping up across Canada and analysts say more increases are likely. But it's still a bargain compared with last year. According to price-tracking website Gasbuddy.com, the national average for a litre of regular was about 93 Canadian cents, an increase of 3.6 Canadian cents over the past week. (http://bit.ly/1xeDq3X)

** The federal government of Canada will delay parole eligibility for a decade or more beyond the current 25 years for some murderers, backing off a plan to make life truly mean life in prison by denying some convicted killers any hope of parole. (http://bit.ly/1EFDr9z)

NATIONAL POST

** Calgary-based Nexen Energy ULC is reviewing its "organizational requirements" after its Chinese parent, CNOOC Ltd, announced deep investment cuts in response to the crash in oil prices. (http://bit.ly/1ArDR1U)

** WestJet Airlines Ltd expects its fuel costs to fall by as much as 30 percent in the first quarter but travellers won't see a penny of that unless the airline experiences a sudden drop in demand, executives said on Tuesday. (http://bit.ly/1vr31wo)

** Canadian Foreign Minister John Baird thanked his "friend and mentor" Stephen Harper as he confirmed he is quitting politics in the House of Commons on Tuesday. The prime minister gave him a big hug but probably felt like putting his foreign affairs minister in a headlock. (http://bit.ly/1DdcxEk)

China

CHINA SECURITIES JOURNAL

- The Shanghai Stock Exchange said on Tuesday that each investor can hold an option premium of maximum 20 positions while the total holding should be less than 50 positions in exchange-traded funds (ETFs) trading.

- Seventy-one brokerages and 10 futures companies have received approval from the Shanghai Stock Exchange for 50 ETF options trading business, said Nie Yan, general manager at China Securities Depository and Clearing Corp Ltd in Shanghai.

SECURITIES TIMES

- China's deficit in its capital and financial account in the fourth quarter of 2014 was at $91.2 billion, the highest since 1998, data from the State Administration of Foreign Exchange (SAFE) showed on Tuesday.

CHINA DAILY

- China will strengthen research into genetically modified crops in order to prevent foreign products from "dominating China", said an official at the Central Rural Work Leading Group.

SHANGHAI DAILY

- Chinese courier firms plan a surcharge for packages sent during the Chinese New Year between Feb. 18 and 24, given the labour shortage during the holiday, the newspaper reported.

- Shanghai plans to increase its outbound direct investment to $15 billion compared with $12.3 billion last year, the city's commission of commerce said on Tuesday.

 

Britain

The Times

TESCO TO PAY 2.1 MLN STG TO FORMER CHIEF EXECUTIVE AND CHIEF FINANCIAL OFFICER

Tesco Plc has been forced pay a total of 2.1 million pounds to its former chief executive and chief financial officer after admitting that it had no legal grounds to continue withholding the money from them. Britain's largest supermarket chain had announced in October that it was suspending payments owed to Philip Clarke, who was forced out last summer, and Laurie McIlwee, his finance chief who departed a few months earlier, amid an investigation into a 263 million pound accounting scandal at the retailer. (http://thetim.es/1CXlOAf)

The Guardian

GREECE FINANCE MINISTER'S SOOTHING COMMENTS RAISE HOPES AND IMPRESS MARKETS

Hopes for a deal over Greece's 315 billion euros ($361.05 billion) debt buoyed markets on Tuesday as new finance minister Yanis Varoufakis stepped up his efforts to get the backing of the country's creditors. Varoufakis, the Marxist economist appointed to the post after last week's election, will meet the head of the European commission, Jean-Claude Juncker, and Mario Draghi, who is the head of the European Central Bank on Wednesday, following talks with his financial counterparts in France, Italy and the UK. (http://bit.ly/1DC2gzK)

SPORTS DIRECT FACES MULTIMILLION-POUND CLAIM FROM ZERO-HOURS CONTRACT WORKERS

Sports Direct International Plc is facing a claim for millions of pounds from nearly 300 workers excluded from the retailer's generous bonus scheme because they were on zero-hours contracts. The employees were excluded from a bonus scheme that paid out about 160 million pounds worth of shares to 2,000 "permanent" workers in 2013. (http://bit.ly/1x8fkrk)

The Telegraph

RBS, BARCLAYS AND LLOYDS DOWNGRADED OVER FEARS GOVERNMENT WILL NOT HELP THEM IN NEXT CRISIS

Royal Bank of Scotland Group Plc, Barclays Plc and Lloyds Banking Group Plc were downgraded by ratings agency Standard & Poor's on Tuesday amid fears the UK government will refuse to offer them financial support in the event of another crisis. The trio were among six European banks to have their ratings cut by S&P following a new EU law that will force any lender that requires financial help to slash its liabilities by 8 percent. Member states had to adhere to the new rules by Jan. 1. (http://bit.ly/1ApSItS)

VIRGIN MEDIA URGES SKY TO RAISE BROADBAND PRICES

Cable operator Virgin Media has risked a regulatory backlash by urging rivals to raise their broadband prices, arguing that consumers and businesses should pay more to fund investment in Britain's internet infrastructure. It made the appeal on Tuesday at an industry conference at BT Plc's headquarters. Sky Plc has slashed broadband charges part of its bitter rivalry with BT.

Sky News

BRITISH BANKERS' ASSOCIATION TO CALL FOR TRADERS TO REQUIRE TRADING LICENCE

All traders in Britain's financial markets should be forced to seek professional qualifications before they can operate, the banking industry's main lobbying group is to tell George Osborne. (http://bit.ly/1DC2gzK)

NEW CO-OP CHAIRMAN TO DONATE PAY TO CHARITY

The businessman being lined up as the Co-operative Group Ltd's first independent chairman is to donate his six-figure pay package to charitable causes linked to the mutual. Allan Leighton is expected to declare his intention to give away his salary if he is confirmed in the role as expected in the coming days. (http://bit.ly/1uVAEAF)

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
ADP employment change report for January at 8:15--consensus up 220K
Markit services PMI for January at 9:45--consensus 54.1
ISM non-manufacturing composite for January at 10:00--consensus 56.5
DOE petroleum inventory reports for week of Jan. 30 at 10:30

ANALYST RESEARCH

Upgrades

athenahealth (ATHN) upgraded to Outperform from Market Perform at Cowen
Church & Dwight (CHD) upgraded to Neutral from Underperform at BofA/Merrill
Coupons.com (COUP) upgraded to Neutral from Sell at Goldman
Entropic (ENTR) upgraded to Neutral from Underperform at Credit Suisse
Gladstone Capital (GLAD) upgraded to Market Perform at Keefe Bruyette
Hexcel (HXL) upgraded to Neutral from Sell at UBS
Hilton (HLT) upgraded to Outperform from Neutral at RW Baird
Iconix Brand (ICON) upgraded to Buy from Hold at Brean Capital
Myriad Genetics (MYGN) upgraded to Outperform from Market Perform at JMP Securities
Quanta Services (PWR) upgraded to Buy from Hold at BB&T
Santander Mexico (BSMX) upgraded to Neutral from Underweight at JPMorgan
SouFun (SFUN) upgraded to Overweight from Neutral at JPMorgan
Stryker (SYK) assumed with an Overweight from Neutral at Piper Jaffray

Downgrades

Airgas (ARG) downgraded to Equal-Weight from Overweight at First Analysis
Arista Networks (ANET) downgraded to Neutral from Buy at Citigroup
Artisan Partners (APAM) downgraded to Sell from Neutral at Citigroup
BreitBurn Energy (BBEP) downgraded to Underperform from Neutral at Credit Suisse
Calix (CALX) downgraded to Neutral from Buy at Goldman
Calix (CALX) downgraded to Neutral from Buy at UBS
Dean Foods (DF) downgraded to Market Perform from Outperform at BMO Capital
Enduro Royalty (NDRO) downgraded to Equal Weight from Overweight at Barclays
Entropic (ENTR) downgraded to Hold from Buy at Needham
Ericsson (ERIC) downgraded to Neutral from Overweight at JPMorgan
Fiserv (FISV) downgraded to Market Perform from Outperform at BMO Capital
Goodrich Petroleum (GDP) downgraded to Hold from Buy at Canaccord
Isis Pharmaceuticals (ISIS) downgraded to Neutral from Overweight at Piper Jaffray
MDU Resources (MDU) downgraded to Underweight from Equal Weight at Barclays
Marriott (MAR) downgraded to Neutral from Outperform at RW Baird
Myriad Genetics (MYGN) downgraded to Neutral from Buy at Mizuho
Myriad Genetics (MYGN) downgraded to Underperform from Neutral at Credit Suisse
National Oilwell (NOV) downgraded to Neutral from Buy at Sterne Agee
Pacific Coast Oil (ROYT) downgraded to Equal Weight from Overweight at Barclays
Pentair (PNR) downgraded to Hold from Buy at KeyBanc
Pentair (PNR) downgraded to Market Perform from Outperform at Bernstein
Stratasys (SSYS) downgraded to Hold from Buy at Stifel
Triumph Group (TGI) downgraded to Neutral from Buy at UBS
Vanguard Natural (VNR) downgraded to Equal Weight from Overweight at Barclays
Waddell & Reed (WDR) downgraded to Neutral from Buy at Sterne Agee
Waddell & Reed (WDR) downgraded to Sell from Neutral at Citigroup

Initiations

Columbia Property (CXP) Trust initiated with a Buy at Wunderlich
Franklin Street (FSP) initiated with a Buy at Wunderlich
Legacy Reserves (LGCY) reinstated with an Equal Weight at Barclays
Michaels (MIK) reinstated with a Neutral at Credit Suisse
Otonomy (OTIC) initiated with an Outperform at Cowen
TerraForm Power (TERP) reinstated with an Overweight at Barclays
Zimmer (ZMH) assumed with an Overweight at Piper Jaffray

COMPANY NEWS

J.M. Smucker (SJM) to acquire Big Heart Pet Brands for approximately $5.8B
Tronox (TROX) to acquire Alkali Chemicals business from FMC Corporation (FMC) for $1.64B
Statoil's (STO) board appointed Eldar Saetre as new president and CEO
Ford (F) said it would add 1,550 jobs to support demand for new F-150
Macy's (M) acquired Bluemercury for $210M in cash. Macy's said Q4 comparable sales growth on an owned plus licensed basis was 2.5%
Disney CEO Iger said no discernible impact to Disney parks from measles outbreak
Gilead (GILD), which announced a 43c dividend and $15B share buyback program,  said it plans to offer 46% discount on $1000 a day Hepatitis C pill Harvoni

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Asbury Automotive (ABG), Spectra Energy (SE), Evercore Partners (EVR), Cognizant (CTSH), Whirlpool (WHR), Steris (STE), ArcBest  (ARCB), ClickSoftware (cksw), Arlington Asset Investment (AI), Jack Henry (JKHY), Atmos Energy (ATO), Barrett Business (BBSI), Entropic (ENTR), Eagle Materials (EXP), Wabash (WNC), RenaissanceRe (RNR), Silgan Holdings (SLGN), IAC (IACI), C.H. Robinson (CHRW), Vascular Solutions (VASC), Enova International (ENVA), Myriad Genetics (MYGN), NeuStar (NSR), Arthur J. Gallagher (AJG), Disney (DIS), Edwards Lifesciences (EW), Oclaro (OCLR), RingCentral (RNG), Take-Two (TTWO), Manhattan Associates (MANH), Planar Systems (PLNR), Omnicell (OMCL), Gilead (GILD), Ultimate Software (ULTI), Chipotle (CMG), Lattice Semiconductor (LSCC), Unum Group (UNM)

Companies that missed consensus earnings expectations include:
Littelfuse (LFUS), Humana (HUM), Humana (HUM), Mueller Water (MWA), Atwood Oceanics (ATW), Hudson Valley (HVB), Alpha & Omega (AOSL), Powell (POWL), RadiSys (RSYS), Sparton (SPA), AXIS Capital (AXS), Wynn Resorts (WYNN), QCR Holdings (QCRH)

Companies that matched consensus earnings expectations include:
Healthcare Services (HCSG), Calix (CALX), Aflac (AFL), Pacific Biosciences (PACB), Vitesse (VTSS), Fiserv (FISV)

Whirlpool (WHR) backs FY15 ongoing business EPS view of $14.00-$15.00
Toyota (TM) reports Q3 net income 600B yen vs.525.46B yen last year
Take-Two (TTWO) sees Q4 EPS 15c-25c, consensus 25c, sees FY15 EPS $1.65-$1.75, consensus $1.38
Macy's (M) raises 2014 EPS outlook to $4.35-$4.37 from $4.25-$4.35, consensus $4.35

NEWSPAPERS/WEBSITES

Amazon (AMZN) challenges IDC report of 70% decline in tablet sales, Re/code reports
GlaxoSmithKline (GSK) hires Citi (C), Goldman (GS), Morgan Stanley (MS) to advise on possible ViiV IPO, Reuters reports
Novartis (NVS) faces temporary suspension in Japan, Financial Times reports
Apple (AAPL) PC shipments to grow 10%-15% in 2015, DigiTimes reports
Google (GOOG) SVP of Knowledge Alan Eustace to retire, TechCrunch says
Twitter (TWTR) to set up R&D center in India, Financial Times reports

SYNDICATE

Catalyst Pharmaceutical (CPRX) files automatic common stock shelf
Intercept (ICPT) files to sell 800k shares of common stock
Omega Healthcare (OHI) files to sell 8M shares of common stock
Pattern Energy (PEGI) 12M share Secondary priced at $29.25
Recro Pharma (REPH) files to sell 2.5M shares of common stock for holders
Senior Housing (SNH) files to sell 25M shares of common stock
Tonix Pharmaceuticals (TNXP) files to sell common stock, no amount given
Ultragenyx (RARE) files automatic mixed securities shelf
Ultragenyx (RARE) files to sell $125M of common stock
Ziopharm (ZIOP) 10M share Secondary priced at $8.75